Brent crude futures for August delivery fell 1.03% to $72.40 a barrel on Tuesday, extending a sharp decline that has seen the benchmark drop below the $76 threshold for the first time since late February.
The sell-off reflects a shift in market sentiment as investors weigh the prospect of diplomatic resolution against the backdrop of renewed military activity.
The price action comes as both the US and Iran exchanged missile strikes over the weekend, threatening the interim ceasefire aimed at de-escalating hostilities.
Despite the escalation on the ground, traders are increasingly pricing in the potential for a breakthrough in talks scheduled in Doha.
This divergence between kinetic conflict and diplomatic engagement has created a volatile trading environment, with supply disruption risks being partially offset by hopes for a negotiated settlement.
The decline marks a significant retreat from the risk premium that had supported oil prices since the outbreak of hostilities between the US, Israel, and Iran.